Oregon Pension Fund Runs up Industrial Portfolio with Three New Commitments Totaling $750MM

Alere Property Group, PGIM Real Estate, JLL, Orange County, Inland Empire, Los Angeles, Orange County
Photo by Ryan Parker

By Jon Peterson

The industrial market across the country continues to draw institutional investment dollars. In another example of the industry’s appeal, Salem-based Oregon Public Employees Retirement Fund approved three new real estate commitments totaling $750 million that will all be invested in industrial assets in a variety of markets around the country. This initiative will also target acquisitions across the West Coast, according to sources familiar with the investor.

One of the commitments of $350 million has been allocated for the second funding of the LBA Oregon Core Industrial SMA. This will be a separate account between the pension fund and LBA Realty. This manager has an investment history of buying and owning assets on both the West and East Coasts as part of a national strategy.

LBA Realty has a corporate office in Irvine along with regional offices in a variety of other West Coast markets. This includes San Diego, Los Angeles, San Francisco and Seattle. The new allocation is the second commitment that Oregon PERF has made with LBA Realty. The separate account was first formed in 2019 with the pension fund staking the relationship with a $250 million commitment.

“LBA Realty has deployed or committed the capital that we first awarded to them. We have been pleased with their performance, as they continue to show they are a strong industrial manager,” says Tony Breault, senior real estate investment office for the Oregon State Treasury, which makes investment recommendations for the Oregon PERF.

The LBA separate account will be looking for core industrial assets on a national scale. The real estate manager does have investment discretion, which allows them to make the final decision on the buying and selling of properties. The leverage amount planned on the separate account portfolio should be around 40 percent.

Oregon PERF has made a second commitment with LBA Realty. This was a $200 million commitment into the LBA Logistics Value Fund IX. It was set to have a final close in October with a targeted capital raise of $1.95 billion, according to industry sources.

The final new industrial commitment by Oregon PERF was for $200 million to be placed into the Nuveen US Cities Industrial Fund. Nuveen Real Estate is the manager of this core open-ended commingled fund. It looks to invest in industrial assets on a national scale.

With the three commitments, Oregon PERF has now reached its targeted allocation for industrial assets. The pension fund is planning to be more active in 2022 in the value-add sector of its real estate portfolio. It will seek investment opportunities in property types in which it has limited exposure.

The moves by the pension fund of expanding its industrial portfolio is reflective of the strategy large public pension funds have deployed across industrial assets, according to industry sources. This type of investor in many cases is looking to be over-allocated to the industrial property type when compared against the major benchmark, the NCREIF Property Index. Many of the major pension fund real estate consultants have recommended to their clients to have a larger percentage of its real estate portfolio invested in the property type, and they believe industrial will be the best performer of the four major property types over the next several years.